Turkish Bond Defaults: Bondholders’ Boards, Restructuring and Enforcement for Foreign Institutional Investors

Market turmoil tests issuers’ ability to pay their debts, and holders of Turkish lira corporate bonds, bills and lease certificates face the question of what happens when an issuer misses a payment or asks to change the terms. Turkish law gives bondholders a collective voice and an individual remedy. Collectively, holders of each series form a bondholders’ board (borçlanma aracı sahipleri kurulu, “BASK”) that can amend interest, maturity, principal and other key terms by a two-thirds majority of the outstanding nominal value, binding dissenting and absent holders once the issuer’s board approves (Capital Markets Law Art. 31/A; Communiqué II-31/A.1 Art. 4(2)). Holders of other series affected can call a general board and block the decision by a two-thirds vote (Art. 4(3)–(5)). If terms are amended after a payment default, enforcement proceedings stop and limitation does not run until all debts under the instrument are paid (Capital Markets Law Art. 31/A(5)). Individually, each holder can enforce: the document issued by the Central Registry Agency (MKK) for an unpaid instrument counts as a document allowing an objection to enforcement to be removed (Art. 31(4); Enforcement and Bankruptcy Law Art. 68). This guide explains these rules, the interaction with insolvency and disclosure, and what a foreign institution should do. It reflects the legislation in force as at 25 October 2026.

Which instruments and which rules

The regime discussed here covers debt instruments issued in Turkey under the Capital Markets Law No. 6362: bonds, bills and other instruments that SPK treats as debt instruments under the Communiqué on Debt Instruments No. VII-128.8. The bondholders’ board rules are in Capital Markets Law Art. 31/A, added in 2020, and in the Communiqué on Bondholders’ Boards No. II-31/A.1, published in the Official Gazette of 11 September 2020 (Communiqué Arts. 1–3).

Two exclusions matter. The Communiqué does not apply to debt instruments that an issuer has issued abroad (Art. 8(1)); eurobonds of Turkish issuers are governed by their own documentation and foreign law, usually English or New York law, and their holders’ meetings follow those documents. The investor compensation scheme does not help here either: it covers failures by investment firms to return client cash or securities, not an issuer’s default (Capital Markets Law Art. 84(1)–(2)).

The issue documents come first

Much of the regime is delegated to the prospectus or issue document. The rules for convening the bondholders’ board and taking decisions must be set out in it (Capital Markets Law Art. 31/A(2)). It must define the nature and scope of the debts arising from the instrument and the events of default, including concrete situations that amount to default in repayment (Communiqué Art. 9(1)). It sets out whether a board decision is needed to change covenants on the issuer’s financial or operational position (Art. 4(6)), the method of calling meetings, proxies, chairing, approval periods and other procedural matters (Art. 6(5)), and the representative’s appointment, qualifications, powers and fees (Art. 5(3)). It may impose stricter majorities than the minimums (Art. 4(2)).

The first step for any holder is therefore to obtain the prospectus or issue document for each series held, together with any supplements, and to read the default definitions, meeting rules and covenants before taking a position.

The bondholders’ board

The holders of an issuer’s outstanding debt instruments form a bondholders’ board; the holders of each series may form a separate board (Capital Markets Law Art. 31/A(1)). The Communiqué distinguishes two bodies. A series board (Tertip BASK) is formed by the holders of one or more series to decide on changes affecting investment decisions in the terms set out in the issue documents or defined at MKK on the basis of them (Communiqué Art. 3(1)(k)). A general board (Genel BASK) is formed, at their request, by holders of the issuer’s other outstanding series who consider that a series board decision adversely affects their rights (Art. 3(1)(e)). A series is defined as instruments issued under the same ISIN code (Art. 3(1)(j)).

The statute sets the floor. Unless SPK or the issue documents set a stricter majority, decisions require the affirmative vote of holders representing at least half of the nominal value of the series, or of all outstanding instruments for a board of all holders, and decisions taken with the qualified majority set by SPK bind holders who did not vote in favour (Capital Markets Law Art. 31/A(3)). SPK has used this power to set a stricter majority for series boards, as explained next.

Series board decisions

Changes to the interest, maturity or principal of a series, or to other essential terms stated in the issue documents, that would affect investors’ investment decisions require a decision of the series board (Communiqué Art. 4(1)). Unless the issue documents set a stricter majority, decisions are taken by the affirmative vote of holders representing two-thirds of the outstanding nominal value of each series (Art. 4(2)). The majority is calculated on the outstanding amount, not on those present.

A series board decision is not valid unless the issuer’s board of directors approves it within three business days of the meeting. Once approved, and unless rejected by a general board, it binds holders of the same series who did not vote in favour or who did not attend despite a proper call (Art. 4(2)).

The general board: protection for other series

A series board decision can harm holders of other series, for example by extending one series’ maturity so that it ranks in time ahead of others, or by granting it new collateral. The Communiqué gives other holders a check. Holders of 20 per cent of the nominal value of all the issuer’s other outstanding series, under the same or different issue ceilings, may request a general board within five business days of the issuer’s board approving the series decision, on the ground that it adversely affects their rights. After that period, no request can be made and the series board decision becomes final (Communiqué Art. 4(3)).

The general board must meet within fifteen business days of the board’s approval of the series decision. If, despite a proper call by the board, it does not meet in that period with at least the decision majority, the series decision becomes final (Art. 4(4)). The general board decides by holders of at least two-thirds of the total nominal value of instruments entitled to attend; it considers the approved series decisions that adversely affect its members, and if they are rejected by a two-thirds majority, the series decision does not take effect (Art. 4(5)).

Financial and operational covenants

Many issue documents contain commitments by the issuer about its financial or operational position, such as limits on indebtedness or restrictions on asset disposals. Whether changing such commitments requires a series board decision, and if so with what majority, is determined in the issue documents; a decision on this does not require general board approval (Communiqué Art. 4(6)). Holders should check whether waivers of covenant breaches can be granted by the issuer alone, by the representative or only by the board, because covenant breaches often precede payment defaults.

Meetings, voting and excluded holders

Board meetings are, as a rule, held physically, but decisions may also be taken without a meeting by circulating the text by hand or electronically for signature by holders or their proxies. Issuers whose shares are listed, and issuers that have offered debt instruments to the public, must allow electronic participation alongside physical attendance; electronic participation, proposals, statements and votes have all the legal effects of physical participation (Communiqué Art. 6(1)). The list of persons entitled to attend is prepared by the issuer’s board from the list provided by MKK (Art. 6(2)). The electronic general meeting rules for joint stock companies apply by analogy (Art. 6(3)).

Instruments held by the issuer or its related parties carry no voting rights and are not counted in quorums; the chair of the meeting is responsible for this (Art. 6(4)). SPK may send observers (Art. 6(6)), and the issuer must make a special-situation disclosure about the board under SPK’s disclosure rules (Art. 6(7)). Standard forms are used for the attendance list, proxies and minutes (Art. 6(5)).

The bondholders’ representative

A representative may be appointed to represent bondholders (Capital Markets Law Art. 31/A(4)). Holders of more than half of the outstanding nominal value of one or more series may elect a representative, and may remove the representative by the same majority; the issue documents may also designate one. Different series may have the same or different representatives, natural or legal persons (Communiqué Art. 5(1)).

The representative must not have been convicted of specified serious offences, including fraud, breach of trust, fraudulent bankruptcy and laundering, and must have the professional training, knowledge, experience, integrity and reputation to protect holders’ rights in conflicts with the issuer in line with the principle of equal treatment; where the representative is a legal entity, these requirements apply to the individual it appoints (Art. 5(2)). Other matters, including powers and fees, are set out in the issue documents (Art. 5(3)). For a group of foreign institutions, electing a capable Turkish representative can make coordination with the issuer and other holders much easier.

Secured instruments

SPK may allow capital market instruments to be secured by assets it considers appropriate. Ownership of the collateral is transferred to a collateral agent, which must be an investment firm with general custody authority, or a limited real right is created in its favour (Capital Markets Law Art. 31/B(1)). On default or other contractual or statutory grounds, the collateral agent may sell the collateral and distribute the proceeds among investors without notice, court permission or auction (Art. 31/B(5)). The collateral is separate from the agent’s own assets and cannot be attached for its debts, pledged or included in its bankruptcy estate (Art. 31/B(6)), and agreements reducing or excluding the agent’s liability are void (Art. 31/B(8)).

Holders of covered securities and of any debt instruments protected by collateral form their own series board, separate from unsecured holders, on matters concerning their instruments, and they do not attend general boards. They do attend, however, for any amount left unsecured under partial collateral, or where new collateral is to be granted to other series so that their existing collateral is affected (Communiqué Art. 7(1)–(2)).

Default and restructuring

The issue documents must define payment default concretely (Communiqué Art. 9(1)). Once a default has occurred, the issuer may seek to restructure the instrument by amending its terms through the series board. The statute attaches important consequences to such an amendment: if the terms of a debt instrument are amended after a payment default, all enforcement proceedings started because of the default stop from the date the amended terms are deemed accepted; interim injunctions and precautionary attachments are not executed; and limitation and forfeiture periods that could be interrupted by an enforcement step do not run. The stayed proceedings lapse once all debts under the instrument have been performed (Capital Markets Law Art. 31/A(5); Communiqué Art. 9(2)).

This works as a statutory standstill. A holder that has already started enforcement, or obtained a precautionary attachment, will see it suspended once a valid restructuring decision binds the series. If the issuer then performs the amended terms in full, the suspended proceedings lapse; if it fails again, the holder needs to assess its position under the amended terms and the issue documents.

Interest after default

Bonds carry fixed payment dates, which matters for default interest. Under the Code of Obligations No. 6098, a debtor of a debt that has fallen due is put in default by the creditor’s notice, but where the payment date was fixed by agreement, the debtor is in default as soon as that day passes, without notice (Art. 117). A missed coupon or redemption on a scheduled date therefore puts the issuer in default automatically.

If the issue documents do not set a default interest rate, the rate is determined by the legislation in force when the interest obligation arises (Art. 120(1)). A contractual default rate may not exceed that statutory rate by more than one hundred per cent (Art. 120(2)), and where a contractual interest rate higher than the statutory rate was agreed but no default rate, the contractual rate applies as the default rate (Art. 120(3)). Under the Law on Statutory and Default Interest No. 3095, as amended by Law No. 7589 with effect from 31 July 2026, statutory interest is set by reference to the Central Bank’s rediscount rate (Art. 1); default interest follows that rate unless otherwise agreed, and in commercial transactions the creditor may claim the Central Bank’s short-term advance rate if it is higher (Art. 2). Where the contractual interest rate exceeds those rates and no default rate is agreed, default interest cannot be lower than the contractual rate (Art. 2). Compound interest cannot be charged, subject to the Commercial Code (Art. 3). Interest on foreign-currency debts is governed by Art. 4/a. How these rules apply in a claim schedule is explained in Calculating Damages in Turkish Securities Claims.

Individual enforcement

Absent a binding restructuring, each holder can pursue its own claim. Where an issuer fails to meet payment obligations under debt instruments, the document issued by MKK to the right-holders counts as one of the documents listed in Enforcement and Bankruptcy Law Art. 68(1) (Capital Markets Law Art. 31(4)). In practice, this strengthens enforcement without a judgment (ilamsız takip).

• ▸ Starting enforcement. The holder files an enforcement request stating the amount in Turkish lira, the interest and its start date, and the document or cause of the debt; a creditor resident abroad gives an address in Turkey (Enforcement and Bankruptcy Law Art. 58).
• ▸ Debtor’s objection. The debtor may object within seven days of service of the payment order (Art. 62(1)).
• ▸ Removal of the objection on documents. Because the MKK document qualifies under Art. 68(1), the holder can ask the enforcement court to remove the objection within six months of being notified of it; if the debtor produces no document supporting its objection, the court removes it (Art. 68(1)–(2)).
• ▸ Action to set aside the objection. Alternatively, within one year of notification of the objection, the holder may sue to set aside the objection by proving the claim; if the objection is found unjustified, the debtor may be ordered to pay compensation of at least 20 per cent of the amount (Art. 67(1)–(2)). For commercial money claims, mediation is a condition of this action (Commercial Code Art. 5/A(1)).

Starting enforcement also interrupts limitation (Code of Obligations Art. 154(2)). The limitation rules are collected in Limitation Periods for Investor Claims in Turkey, and the court process in How a Securities Lawsuit Proceeds in Turkey.

Enforcement by way of bankruptcy

Issuers are merchants and therefore subject to bankruptcy for all their debts (Commercial Code Art. 18(1)). A creditor may choose enforcement by way of bankruptcy: the payment order then warns that if the debt is not paid within seven days, the creditor may apply to the court for the debtor’s bankruptcy (Enforcement and Bankruptcy Law Art. 155). This route puts pressure on the issuer but also affects all creditors, and in practice often leads the issuer to seek a concordat. It should be used deliberately, ideally in coordination with other holders.

Concordat and bankruptcy of the issuer

If the issuer applies for concordat, bondholders are creditors like any other. During the moratorium, no enforcement is possible and pending proceedings stop (Enforcement and Bankruptcy Law Art. 294(1)); claims must be filed within fifteen days of the commissioner’s announcement (Art. 299); and the plan is approved by majorities of creditors and claims (Art. 302). The bondholders’ board and the concordat vote are separate mechanisms: the former operates under the capital markets rules and the issue documents, the latter under the Enforcement and Bankruptcy Law.

In a bankruptcy, unsecured bond claims rank in the fourth, general rank with other unsecured creditors (Art. 206), while collateral held by a collateral agent for secured instruments is protected from the agent’s creditors (Capital Markets Law Art. 31/B(6)). The procedures and deadlines are set out in When a Turkish Issuer or Broker Becomes Insolvent.

Disclosure duties around default

Issuers that have offered debt instruments to the public must disclose, among other things, the issue of each series, any default in payment of principal, interest or coupon, any change in terms set at issue that may affect holders’ rights, the exercise of conversion or exchange rights, rating changes, changes in guarantees and collateral, and repurchases of instruments from related parties (Communiqué II-15.1 Art. 19(1)). Issuers covered by the Communiqué’s fourth section, such as issuers whose shares are not traded and whose instruments were sold to qualified investors or by private placement, must also disclose developments in their financial position or activities that may adversely affect their ability to meet obligations to holders (Art. 21(1)(h)). The issuer must make a special-situation disclosure about bondholders’ boards (Communiqué II-31/A.1 Art. 6(7)).

Delayed or misleading disclosures about an issuer’s ability to pay can found claims for losses on bonds bought in the meantime, as explained in Continuous Disclosure in Turkey.

Liability for misleading issue documents

The prospectus and the issue document are public disclosure documents. Issuers and signatories are jointly liable for losses caused by false, misleading or incomplete information in them, and report preparers such as auditors and rating agencies are also liable for their reports (Capital Markets Law Arts. 10, 11(3) and 32(1)–(2)). Claims are time-barred six months after the loss (Art. 32(6)). Where a bond issue was sold on the basis of financial statements or projections that concealed the issuer’s true position, this route may lead to solvent defendants other than the issuer. The regime is explained in Prospectus and Disclosure Liability in Turkey, and claims against directors and auditors in Suing Directors and Auditors of Turkish Listed Companies.

Points for foreign institutions

• ▸ Who is the holder. Book-entry instruments are held in accounts at MKK members, and rights are monitored by MKK (Capital Markets Law Art. 13(2)–(3)). The attendance list for a board meeting is based on MKK’s list (Communiqué Art. 6(2)). A foreign institution holding through a global custodian must make sure the custodian chain can register its votes in time, or arrange a proxy using the prescribed form.
• ▸ Electronic participation. For listed issuers and public offerings, electronic participation is available and has full legal effect (Art. 6(1)); this removes the need for physical attendance in Turkey.
• ▸ Short periods. Five business days to request a general board and fifteen for it to meet (Art. 4(3)–(4)) leave little time for internal approvals; voting authority should be agreed in advance.
• ▸ Enforcement formalities. A creditor resident abroad must give an address in Turkey in its enforcement request (Enforcement and Bankruptcy Law Art. 58(2)(1)); a foreign claimant suing in Turkey may have to give security for costs unless exempted on reciprocity (Law No. 5718 Art. 48).
• ▸ Eurobonds are different. The Communiqué does not apply to instruments issued abroad (Art. 8(1)); their documentation and governing law decide holders’ rights.

Action plan after a missed payment

1. 1. Confirm the default. Check the issuer’s KAP disclosures under Communiqué II-15.1 Art. 19 and the default definition in the issue documents (Communiqué II-31/A.1 Art. 9(1)).
2. 2. Obtain the documents. Prospectus or issue document, supplements, covenants, meeting rules and any representative appointment.
3. 3. Map the holders. Identify other holders of the same and other series and any related-party holdings that will be excluded from votes.
4. 4. Obtain the MKK document. For unpaid amounts, as the basis for enforcement and removal of objections (Capital Markets Law Art. 31(4)).
5. 5. Decide on enforcement. Weigh individual enforcement, bankruptcy-route enforcement and negotiation; remember that a binding restructuring will stay enforcement (Art. 31/A(5)).
6. 6. Engage in the board. Vote, request information, consider electing a representative (Communiqué Art. 5) and, if another series’ decision harms you, request a general board within five business days (Art. 4(3)).
7. 7. Watch for insolvency. Monitor announcements for a concordat or bankruptcy and file claims on time.
8. 8. Preserve other claims. Consider disclosure claims against signatories, auditors and rating agencies within six months of the loss (Capital Markets Law Art. 32(6)).

Time limits

Frequently asked questions

What is a bondholders’ board (BASK) in Turkey?

A body of holders of an issuer’s debt instruments, by series or for all series, that can decide on changes to the terms of the instruments under Capital Markets Law Art. 31/A and Communiqué II-31/A.1.

What majority is needed to change the terms of a Turkish bond?

Two-thirds of the outstanding nominal value of the series, unless the issue documents require more, with approval by the issuer’s board within three business days (Communiqué II-31/A.1 Art. 4(2)).

Am I bound if I vote against or do not attend?

Yes. An approved series board decision not rejected by a general board binds holders who voted against or did not attend despite a proper call (Art. 4(2)).

Can holders of other series block a decision?

Holders of 20 per cent of the other series may request a general board within five business days, and a two-thirds majority of the nominal value entitled to attend can reject the series decision (Art. 4(3)–(5)).

Do the issuer’s own bonds count in the vote?

No. Instruments held by the issuer or its related parties have no voting rights and are excluded from quorums (Art. 6(4)).

Can bondholders appoint a representative?

Yes, by holders of more than half of the outstanding nominal value of the series concerned, or in the issue documents; the representative must meet integrity and competence requirements (Art. 5).

What happens to enforcement if the bond is restructured after default?

All enforcement proceedings started because of the default stop, interim measures are not executed and limitation does not run; the proceedings lapse once all debts under the instrument are paid (Capital Markets Law Art. 31/A(5)).

How can a bondholder enforce an unpaid Turkish bond?

By enforcement proceedings supported by the MKK document for the unpaid instrument, which counts as a document allowing the debtor’s objection to be removed by the enforcement court (Capital Markets Law Art. 31(4); Enforcement and Bankruptcy Law Art. 68).

How long do I have after the debtor objects?

Six months to ask the enforcement court to remove the objection on documents, or one year to sue to set it aside (Enforcement and Bankruptcy Law Arts. 67(1) and 68(1)).

Is the issuer in default without a notice when a coupon is missed?

Yes. Where the payment date was fixed by agreement, the debtor is in default as soon as that day passes (Code of Obligations Art. 117).

What default interest applies to a Turkish lira bond?

The rate in the issue documents, within the cap in Code of Obligations Art. 120(2); otherwise the statutory rate under Law No. 3095, with the Central Bank’s short-term advance rate available in commercial transactions if higher (Law No. 3095 Art. 2).

Do these rules apply to eurobonds of Turkish issuers?

No. Communiqué II-31/A.1 does not apply to debt instruments issued abroad (Art. 8(1)).

How are secured bondholders treated?

They form their own series board and do not attend general boards, except for unsecured amounts or where new collateral for other series affects their collateral (Communiqué Art. 7).

Does the Investor Compensation Center cover issuer defaults?

No. It covers investment firms’ failure to return client cash or securities, not losses from an issuer’s default (Capital Markets Law Art. 84(1)–(2)).

Related guides

• Turkey’s 2026 Fund and Market Manipulation Crisis: Legal Guide for Foreign Institutional Investors — the entry point to this series
• Trading Halts, Watchlist Market and Delisting on Borsa Istanbul
• Social Media Manipulation and Unlicensed Investment Advice in Turkey
• When a Turkish Issuer or Broker Becomes Insolvent
• Continuous Disclosure in Turkey: Communiqué II-15.1
• Prospectus and Disclosure Liability in Turkey
• Limitation Periods for Investor Claims in Turkey
• How a Securities Lawsuit Proceeds in Turkey
• Freezing Assets in Turkey for Investor Claims
• Suing Directors and Auditors of Turkish Listed Companies
• Claims Against Brokers, Custodians and Portfolio Managers in Turkey